Meta fined $25b in New Mexico over user data privacy violations

Meta, the parent company of Facebook, Instagram and WhatsApp, has been ordered to pay $25 billion in damages by a New Mexico judge for misleading the public about its handling of user data and content moderation practices, reports BBC.

Judge Francis Mathew issued the ruling yesterday (21 October) following a two-week trial earlier this year, finding that Meta had deliberately misled the public about its Facebook data practices for more than 11 years, from 2010 to 2021.

The judge said the company's misrepresentations extended beyond data privacy and went to the heart of its core business practices.

Meta's head lawyer, CJ Mahoney, said the ruling made it "all but impossible to do business in the state of New Mexico". The company intends to appeal the decision, which Mahoney said it expects to overturn.

The lawsuit originated from Meta's role in the Cambridge Analytica scandal, in which the political consulting firm used data from millions of Facebook users, including in work related to the 2016 US presidential election.

New Mexico also accused Meta of misleading the public about how it benefited from content containing hate speech and how it enforced its rules against such content. The jury found the company had intentionally misled the public on these claims as well.

Lawyers for the state argued that Meta executives had repeatedly claimed user data was never shared with or accessed by third parties without users' permission, despite evidence to the contrary.

They said the company's conduct affected the state's entire population of roughly two million people. The jury found Meta had violated state laws more than 40 million times.

"For too long, powerful technology companies have operated as though their size and influence put them beyond the reach of the law," New Mexico Attorney General Raúl Torrez said on Wednesday.

"Today's result makes clear that no corporation is too powerful to be held accountable."

The state had sought up to $40 billion in fines, while Meta argued that any penalty exceeding $3.4 billion would be unconstitutional.

The judge calculated the total penalty at $219 billion based on thousands of violations of state law but reduced it to $25 billion.

Judge Mathew said the violations and misrepresentations were deliberate and had continued for more than 11 years. Communications among senior executives, including chief executive Mark Zuckerberg, were "designed to mislead the public", he wrote in his order.

The ruling follows a $5 billion fine imposed on Meta by the US Federal Trade Commission in 2019 over its data privacy practices.

New Mexico also fined Meta nearly $1 billion this year over allegations that it misled the public about the safety of its social media platforms for children. The judge in that case compared the company to an industrial polluter, describing the harm caused by its platforms as "the psychological harm and sexual exploitation of children".

Despite the legal setbacks, Meta is investing heavily in artificial intelligence (AI) as it competes with other technology companies.

The company expects to spend at least $135 billion on mostly AI-related projects this year, with expenditure potentially reaching $145 billion.

Zuckerberg told financial analysts that Meta's consumer-focused AI tool, Muse, was already being used by 10 million people.

"Growing Muse to serve billions of people is both our mission and our strategy," he said.

The company's spending has pushed its cash flow into negative territory, with Meta reporting a deficit of more than $2 billion, apparently the first time since it went public 14 years ago, according to a BBC review of its financial documents.

Cash flow measures the money a company retains after paying for operations and investments. Meta is now spending more than it brings in through these activities, despite recording record revenue.

The company's revenue rose 26% year-on-year to $64.5 billion in the July-September quarter, while its profit tripled to $9.8 billion.

Meta Chief Financial Officer Susan Li also announced a new stock split during the call, under which existing shareholders will receive one additional share of non-voting stock.

Li said the new class of shares was not intended for any specific investment at this stage, but pointed to the company's ongoing AI-related costs and the need for greater funding flexibility next year.